Qatar Airways orders 80 A350s

Airbus hopes to close gap with 787

By JAMES WALLACE, P-I AEROSPACE REPORTER

Published 10:00 pm, Wednesday, May 30, 2007

Vowing that this will be the "year of the A350," Airbus signed a preliminary agreement Wednesday with Qatar Airways for 80 of the jets as it seeks to regain momentum against The Boeing Co. and the hot-selling 787 Dreamliner.

The deal, the first major order for the redesigned plane, shows that airlines are willing to wait to get the better jet, John Leahy, Airbus sales chief, said in a conference call from Toulouse, France, with reporters.

Boeing will begin delivering the first 787s to customers in May 2008 -- five years before the A350 will be ready.

"Last year was probably the year of the 787," Leahy conceded. "This is going to be the year of the A350."

Leahy said he will have "in excess" of 200 firm orders for the A350 XWB (extra wide body) by the end of this year, including those for Qatar.

But Boeing already has won 121 firm orders for the 787 this year, which has boosted the total order count for the Dreamliner to 584 from more than 40 customers. That makes the 787 the fastest-selling commercial jet ever before first flight.

The A350, meanwhile, has not yet gained widespread market traction.

Airbus has struggled to renegotiate 100 firm orders that it previously won for an earlier version of the A350. Qatar, based in the capital of Doha, signed an agreement in 2005 to buy 60 of those earlier planes. Wednesday's order would be worth about $16 billion at list prices.

Airbus redesigned the A350 into the extra wide body version after criticism from airlines that the earlier plane would not be competitive against the 787.

The only customer of that earlier version so far to sign a firm agreement with Airbus for the A350 XWB is Finland's state-run airline, Finnair. It ordered 11 in March.

Leahy said he expects that all those previous A350 customers will order the redesigned plane this year, including US Airways.

Airbus is expected to announce more firm orders for the A350 XWB at next month's Paris Air Show.

Leahy said he is close to signing a firm deal with Singapore Airlines for 20 planes. The airline had signed a commitment last year to buy the A350 XWB.

But Singapore Airlines already has placed a firm order with Boeing for the 787.

Leahy said Airbus has to persuade airlines to wait.

"The key part of our marketing and commercial strategy on this program," he said of the A350 XWB, "is that we have to convince people that it is worth waiting for. If it's not worth waiting for, if there is not a big enough margin over what they would get with the 787, then why wait? You would just go with the 787."

But the Seattle P-I previously reported that Qatar already has placed a firm order with Boeing for 30 Dreamliners and that the announcement could be made at the Paris Air Show. Boeing and the airline have declined comment. Those 30 firm Dreamliner orders are now listed by Boeing as being from an unidentified customer.

Asked about that Qatar order for the 787, Leahy would not comment, other than to say he hoped Qatar would stay solely with Airbus and the A350. Qatar also has ordered Boeing's 777.

The timing of the joint A350 announcement by Airbus and Qatar is curious, especially since the order is not yet firm. Airbus described it in a news release as a "memorandum of agreement," or an MOA. Leahy said a firm purchase agreement with Qatar should be completed "in the not-too-distant future."

But Akbar Al-Baker, Qatar's chief executive, already had said -- a couple of months ago -- that the airline planned to order as many as 80 A350 XWBs and that an announcement was likely to be made at the Paris Air Show.

Instead, the announcement was made in Paris at the Elysee Palace. In addition to Al-Baker, also present at the official signing ceremony Wednesday was French President Nicolas Srkozy, Airbus Chief Executive Louis Gallois and Qatar's emir, Sheikh Hamad bin Khalifia Al-Thani.

Airbus officials "need to make as much encouraging noise about the A350 XWB as possible," said Richard Aboulafia of the Teal Group, an aviation consulting business, when asked about the timing of the Qatar announcement.

Airbus needs to generate good news, he said. It is two years late delivering its prized new flagship jet, the A380 superjumbo, because of wiring problems. Airbus has lost market share to Boeing and the 787 and has had to redesign the A350. The stock of the European Aeronautic Defense and Space Co., the parent company of Airbus, has fallen 12 percent this year. Boeing has gained 11 percent in 2007 and Wednesday closed at an all-time high of $100.55 a share, up $2.05.

Boeing beat Airbus in orders last year for the first time since 2000 and could do so again in 2007. But Airbus is likely to make a big splash with order news at the Paris Air Show, which Leahy acknowledged will be an "important show."

On Wednesday, Colombian airline Avianca SA said it would order 38 jets from Airbus, 33 of the single-aisle A320s and five of the longer-range A330s that the A350 eventually will replace.

Qatar, meanwhile, said it will take all three A350 models that Airbus plans to develop, starting with the A350-900. Deliveries will begin in 2013. Qatar said it wants 40 of those planes, as well as 20 of the smaller A350-800s and 20 of the bigger A350-1000s.

Qatar is the first airline to commit to the A350-1000, which Airbus has aimed not at the 787 but the bigger 777-300ER.

Leahy said the design of all three variants has been "frozen" and Airbus is offering performance guarantees to potential customers as it begins to build up the A350 XWB order book.

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The A350 will have more range, better fuel burn per passenger seat and a wider cabin than Boeing's 787, he said. Both the 787 and A350 will use more composite material than any previous large commercial jet.

"There has been a lot of hype about the 787, and there is no denying (Boeing is) getting orders," Leahy said. "But the fact that we will end the year with more than 200 orders, and despite the fact that we are delivering our airplane five years after them, says an awful lot of airlines out there are willing to wait for a better airplane."